EasyJet Airlines - Coursework Example

EasyJet Airlines Introduction: Established in 1995 in the UK, Easyjet is Europes leading low-fares airline providing low cost services from across the UK and its popularity has rocketed over the years due to its reasonably priced tickets and remarkable customer service. EasyJet is based on Londons Luton Airport and they currently operates domestic and international scheduled flights over 500 routes throughout Europe and carries over 40 million passengers yearly. The Civil Aviation Authority (CAA) has ranked Easyjet as UKs largest airline in terms of passengers flown for the second year in a row. According to the CEO Andy Harrison "EasyJet is now the UKs National airline. Passengers have clearly voted with their feet, boarding EasyJets aircraft more than any other airline. Reasons for impressive performance of Easyjet: In a harsh economic environment, EasyJet’s continuous resilient performance is evidence to the superiority of its business model. Europe’s premier air transport network, strong customer proposition and service execution are associated to an extremely efficient operating model that is based on simplicity and low cost. Financial results: Having to face an uncertain business climate such as severe completion, weak consumer confidence and with the hike in fuel and the volatility of currency, EasyJet is one of the few airlines globally to remain profitable during these harsh times. According to the Non Executive Interim Chairman Sir David Michels, these results were driven primarily through good revenue performance offsetting the £86 million unit increase in fuel costs and £31 million reduction in interest income. Marketing results: Easyjet’s marketing strategy took advantage of capacity cuts by other carriers to advance their position in the European short-haul market, capturing shares in important markets such as Milan, Paris, Madrid and London Gatwick and increasing our slot portfolio at congested airports by over 10%. Easyjet has plans to deliver growth of around 7.5% per annum over the coming five year. Easyjet looks to take advantage of the commercial opportunities apparent in European short-haul aviation, whilst delivering positive cash generation beyond the period of the higher than normal capital expenditure associated with the replacement of the more expensive Boeing subfleet. Marketing strategy of Easy jet: Easy Jet has a unique marketing strategy, rather than targeting leisure passengers, Easy Jet’s main target market are the business passengers who are more regular customers than leisure passengers as they fly more than leisure passengers. Easy Jet has also now focused more on internet marketing which is a lot cheaper than other marketing media and hence this enables the company to cut marketing costs and utilize the amount in better customer services. In this way EasyJet maintains a strong portfolio of loyal customers. SWOT Analysis: Strengths: EasyJet is a leading provider of low cost, no frills air travel servicing to many of the leading destinations in the UK and across Europe, including Barcelona, Berlin, Prague and Amsterdam. High quality service at reasonable prices including ticketless travel, internet booking and assisted travel services. Strong branding: Easyjet has invested a lot in advertising and PR and their neon represented fleets standout from their competitors. Environmental friendly fleets are being brought in having lower CO2 emission They have a user friendly website which provides the price breakdown of the passengers planned travel also allowing booking of around 40 seats on one go. Everything is clear on the site allowing no confusion and misunderstanding as the full breakdown of the price plan prevents any hidden charges at the time of booking. As a market leader in an industry Easyjet embraces the environmental responsibilities by contributing to the green house effect to combat global warming. Extremely strong, proactive and innovative leadership roles of the Ex-chairman and Ex-CEO which is being continued High quality employee culture which results in enhancing customer services and retains customers Weaknesses: The company’s newest CEO Carolyn McCall has no previous experience in the airline industry The driving forces such as the low prices and the focus on convenience (few connections, nearby airports, frequent flights) appear to be reaching their natural limits. To further create differentiation could become really difficult EasyJet does not offer free food service on longer flights of two hours or more. EasyJet does not seem to have a long term strategy for expansion outside Europe (Middle East & Asia) No marketing tactics present to retain current customers and building customer loyalty Opportunities: Possibility of exploring other routes to major cities in Europe. Offering free refreshments on flights where the travel time is over two hours. This will make the customers experience more enjoyable. New fleet can be leased out during the recession sessions; this will enable to cut down costs. Marketing efforts should be more extensive to attract domestic customer for the short haul flights. Threats: Competitors domestically and internationally flying the same routes pose threats to the EasyJet in pricing and in different routes External market forces such as the rising cost of oil can impact the business significantly as Easyjet is known for their low cost fares, which will not be possible if the prices rise. Union pressure and employee relations committees can impact on the daily operations by strikes which can damage the company’s image. Gradual saturation in demand for air travel and the economic conditions may decrease the number of passengers which includes casual flyers and corporate travelers as companies may seek to cut down their costs on business trips. Domestic air travel is an extremely competitive and some of the competitors being Jet2, Ryan Air, BMI Baby etc. and various other independent competitors. External competitive forces can reshape pricing policy on some of EasyJet’s routes. Constraints: The airline industry seems to be positioned strongly and experts predict further growth in the low cost-sector. Given the saturated market and the lack of other options in the UK, competition is likely to build up – inevitably followed by consolidation, an early sign of which is easy­Jet’s purchase of GO. The UK market offers modest growth prospects; therefore concentration will be on the con­tinental market and other new EU member markets. So Easyjet must look at some issues with a long term pers­pective. Issues such as: 1. What should be the long term game plan to combat competition and hostile takeover bids? 2. How should it grow and expand its operations without affecting its operating margins? 3. Which are the most profitable geographical markets and niche segments that they can focus on? 4. Should they make plan of expansion outside Europe and if so, to what extent? 5. What other services and other means are available of generating ancillary revenue? Recommendations 1) EasyJet is already catering to business travelers but it needs to further come up with strategies to improve its services to attract the frequent business tra­velers by probably offering corporate deals. 2) The airline should make a specific plan to expand into low cost medium haul sector as the short haul routes are being catered to. With adding some additional services on its flights, they should be able to easily adapt to this sector as well. 3) The growth of the low cost market will slow down con­siderably in the coming years which will increase opera­ting costs and EasyJet must work hard at maintaining its status as low cost service providers without losing its profit margins 4) The value price segment to which EasyJet is targeting is bound to increase, but also the variety of choice available to them is also increasing. So EasyJet needs to work out strategies to retain customers and build customer loyalty. 5) Expansion into Russia. Middle-East, Africa and Asia should be part of their plan without losing its profit margins within Europe and as competition is intensifying within Europe and saturating demand, they must have plans of expansion 6) EasyJet must increase its means of ancillary revenue in-flight and on ground level so it can lower its cost and reduce its exposure to exter­nal forces not under its control Conclusion EasyJet’s major strength besides its amazing business model has been its aggressive, flamboyant marketing approach adop­ted by its ex-chairman Sir Stelios who has worked hard to create a brand image of low cost service providers, which has proven successful and has lead to their brand image to earn high recall and recognition. Ho­pefully this will continue and serve the company well in the competitive markets and future endeavors. But the need of the hour for EasyJet is to expand its vi­sion to include potential measures for becoming a global player by refining its current strategic business model. This is very important as the current European markets would definitely get saturated and as the LCC industry is moving towards consolidation it has to look for new avenues for growth and expansion. Bibliography Sir David Michels (2009) Chairman’s statement, retrieved from: http://2009annualreport.easyjet.com/overview/chairmans-statement.html Richard Jacovitz (2010) Management Turnover as Change Agent, retrieved from: http://managementaschangeagent.blogspot.com/2010/03/easyjet-ezj-lse-european-discount.html Business Teacher (2008) Easy Jet SWOT Analysis, retrieved from: http://www.businessteacher.org.uk/business-resources/swot-analysis-database/easyjet-swot-analysis/ Air Scoop (2007) SWOT Analysis of EasyJet retrieved from: http://www.air-scoop.com/downloads/SWOT_easyJet_Air-Scoop.pdf Read More